0900 GMT February 16, 2019
GS E&C is currently in talks with Entekhab Investment Development Group to lead the construction design of a petrochemicals project in the Middle Eastern country. The design contract is reportedly expected to be worth some $6 million, koreaherald.com reported on Wednesday.
"GS E&C in October signed a head of agreement with the Iranian firm with regards to the design of the project," GS E&C officials said. The total size of the petrochemicals project will be measured after the completion of the design process, the company added.
A head of agreement is a nonbinding document that outlines the main issues related to the possible contract. It is often regarded as the first step for a legally binding contract. In Iran, partners need the document to win the government's approval to raise investment.
If GS E&C secures the design contract, it will become the company's first deal to be signed with a firm in Iran in eight years.
The previous deal GS E&C secured in Iran was the South Pars natural gas field development phases 9 and 10 project, which was completed in 2008.
GS E&C secured an additional South Pars gas field development project the following year, but the deal was canceled due to economic sanctions against Iran over its nuclear program in 2010.
GS E&C has completed five construction projects, totaling around 2.4 billion won ($2.2 million), since the company established its Tehran office in 2001.
Investment in focus
Last week, the South Korean ambassador to Iran said Seoul is shifting focus from trade to investment in Iran.
Kim Seung-ho further said that Seoul is looking beyond trade.
South Korea has increased commercial exchanges with Iran following the nuclear deal signed between Iran and the world powers in 2015.
In the Iranian year to March 2017), bilateral trade reached the highest level of $6.33 billion over the past 10 years. Latest statistics on bilateral trade also indicate that this rising trend looks set to continue and a new record is at hand.
"Trade is like gluing two things but investment is rather a chemical reaction. When two materials react chemically, it is almost impossible to detach them. So the Korean government urges Korean companies to invest more in Iran," Kim said.
Iran signed its biggest credit line deal in recent years with South Korea's Eximbank in August 2017. The deal envisages as much as €8 billion in loans provided by South Korean companies to finance various projects in Iran.
"The Iranian and Korean companies should apply for their common projects to Korea's Eximbank. Then the bank reviews if the project is really profitable or not," the ambassador elaborated.
Referring to hurdles to foreign investment in Iran, he said the Islamic Republic needs to improve its business environment to help foreign investors gain a foothold in the country.
"We can't go further (than urging Korean companies to invest in Iran) because the government can't enforce its will. It is for the companies to decide if they want to put their money here in Iran or not … If Iran provides a good environment for foreign companies, they won’t hesitate to come here," he said.
"Iran needs to make the environment more conducive to absorb foreign investment. It should provide some good incentives and of course make the environment more predictable and transparent."
Speaking of a conductive business environment, he called on the Iranian government to do more to pave the way for stronger presence of foreign investors in the country.
"Let me give you a simple example. Here in Iran, there are not enough schools for foreign children. So when it comes to Korean companies sending their representatives to Iran, everybody is reluctant. So we send someone here who do not have very young children."
Government spokesman Mohammad Baqer Nobakht said recently that foreign investment in Iran has seen a tenfold increase following the 2015 nuclear deal between Iran and six world powers.
Speaking at a news conference earlier this month, Nobakht said foreign investments worth over $13 billion were made in Iran last year, IRNA reported.
Director General of Industries Ministry's Foreign Investment Office Afrouz Bahrami said Iran attracted $24.95 billion in foreign investments during Sept. 2013-17.
The biggest investors in Iran during the four-year period were Germany, China, Turkey, Austria, the UAE and France were the biggest investors in Iran and the most attractive industries for investors were polymer and chemicals, steel, trade, motor vehicles, mining, plastic and medical devices.